Reaching Your Goals at GORP 2014

GORP 2014One of our favorite events each year is the Graduate Orthodontic Residents Program (GORP), which is right around the corner (July 31–August 3). Our bags are packed, our flight has been confirmed and we are ready to exhibit on the campus of the University of Michigan.

Want to win a Nike Fitbit at the event?!  We will be holding a special soccer-themed contest at our booth. Stop by our table and learn how to enter.

In addition, Shannon Patterson, our Director of Practice Opportunities & Executive Recruiting, will be on hand to speak with you regarding purchasing an orthodontic practice, seeking an associateship position or entering into an employment situation. She can register you in our database of practice opportunities, which allows us to provide potential opportunity matches as they come to light, based on your specific geographic preferences and future ownership desires.

Each resident is also encouraged to contribute to Bentson Clark & Copple’s 2014 Annual Resident Survey. A QR code will be displayed at the booth, which allows easy online access to the survey. Paper copies of the survey will also be available at our exhibit booth, so be sure to stop by.

How Long Will My Orthodontic Practice Transition Negotiations Take?

In the world of orthodontics, timelines are extremely important.  From day one, patients ask, “How long will I have to wear my braces?” As a doctor you provide your best estimation, stating if all things go as planned AND you are compliant, things should stay on time.

In the world of practice valuation and transitions, the second question asked by many doctors (after the total cost of the transaction) is: “How long will my orthodontic practice transition negotiations take?” At Bentson Clark & Copple we tell orthodontists to allow about 6 months, 90 days for a valuation study and another 60 to 90 days for any negotiations and documents.

You’ve identified the candidate; they have reviewed the prepared practice valuation and physically visited the practice. You want to move forward. You have likely discussed the transaction on a high level, and you are now delivering the terms of the proposed transaction to your candidate. The terms are typically delivered in a document called a “term sheet” or “letter-of-intent.” This is usually a five-to-seven page document that outlines the asset allocation of the purchase price (for tax purposes), association periods and compensation for both doctors before and after closing, remedies for breach, non-competes or liquidated damages, how retreatment issues will be addressed, real estate matters, financing terms, and certain representations and warranties by both buyer and seller. This document will be the road map for the attorney to draft legal, definitive documents. Typically, a cash-flow pro-forma is presented in conjunction with the terms so that both parties have a financial illustration of how the transaction relates to their expected income over a period of years.

An open, back-and-forth dialogue between both parties is expected as terms are agreed upon. We suggest that both parties have knowledgeable representation during this stage of the transaction. There are companies that encourage the idea of representing both parties, but Bentson Clark & Copple suggests that both parties seek separate counsel, as there are definite financial conflicts on almost each deal point in a transaction.

However, be aware of pitfalls during this process.  A “my way or the highway” attitude is likely not practical. The fairest spot or win-win most commonly occurs with both sides feeling a similar degree of discomfort. On the other hand, giving too many scenarios or too many different ideas of how to get to agreement often confuses one or both parties to the point of not being able to make a decision. Paralysis by analysis can happen on both sides of the transaction. Careful is good, but if you miss seeing the forest for the trees, the transaction can die, and an opportunity for both buyer and seller could be missed.

Bentson Copple Article Featured in Orthodontic Products Magazine

Nearly every younger orthodontist the Bentson Clark & Copple team speaks with wants to eventually own or co-own a practice. As such, we often get asked the question, Is it better to start my own practice from scratch or purchase an existing practice? Doug Copple of Bentson Clark & Copple advises in weighing the financial rewards of both practice situations.

In the latest issue of Orthodontic Products Magazine, Copple explains how to determine which is the best option based on one’s personal situation and examines some of the primary advantages and disadvantages of both starting a new practice and buying an existing one.

Advantages to starting a new practice:
Advantages include the ability for the doctor to create his/her own office and establish everything exactly the way the doctor wants (rather than inheriting the selling doctor’s facility, employees, and systems).

Disadvantages to starting a new practice:
One disadvantage discussed in this article is the fact that orthodontists generally still have to go into debt to purchase equipment and build out the office space. Additional loans are likely to be required to hire and pay employees and to cover operating expenses during the first several months or years until enough income is generated to cover these costs.

Advantages of buying into an existing practice:
One of the largest advantages the purchasing doctor has is an immediate cash flow. If the purchase price is fair, the financial rewards are greater than starting a new practice, even after repaying the purchase obligation. Additionally, the purchaser immediately has a facility and operating equipment (assuming it is in decent operating shape).

Disadvantages of buying into an existing practice:
Disadvantages are similar to the advantages for starting a new practice – ie, the buyer inherits the selling doctor’s facility, employees, and systems. If these assets are not satisfactory to the buying doctor, it can be difficult and time-consuming to make significant changes to the practice.

Financial Reward
The financial reward of acquiring an existing practice is usually much greater than starting a new practice from scratch, particularly in the first few years of ownership. But, undoubtedly, there are many other factors to consider that may make a start-up more attractive than purchasing an existing practice. Within the article, Copple provides example cash flows for both a start-up and the purchase of an existing practice. These examples compare the two opportunities to provide an illustration of the financial rewards of both investments during the initial years of an orthodontist’s career.

Click here to read the entire article.

Bentson Clark & Copple Traveling to GORP 2013

Bentson Clark & Copple will be arriving on the campus of University of North Carolina at Chapel Hill just in time for GORP 2013.

Our table will be located in the exhibit hall during GORP. Please plan to stop by and say hello. We would love to speak with you regarding purchasing an orthodontic practice or locating an associateship position. Shannon Patterson, our Director of Practice Opportunities & Executive Recruiting, will be on hand to register you in our database of practice opportunities. We will be able to supply you with potential opportunity matches as they come to light, based on your specific geographic preferences and future ownership desires.

This year we invite you to participate in our Instagram contest for a chance to win a Mystery Prize, valued at over $2,800. We would like to also encourage every resident to contribute to Bentson Clark & Copple’s 2013 Annual Resident Survey. We will have paper copies of the survey available or you can scan the QR code displayed at our table to participate online.

GORP was started in 1989 as a means of bringing the orthodontists of the future together for a summer meeting, creating an environment to foster professional growth and interpersonal relationships among colleagues and representatives of the orthodontic industry. Over the past 24 years, the meeting has grown to an event that involves around 500 orthodontic residents from the United States and Canada.This program/meeting is unique in that it is the first annual conference to bring together residents in a dental or medical specialty program. The meeting is sponsored by donations from orthodontic exhibitors, the American Board of Orthodontics and its constituent associations and American Association of Orthodontists Foundation.

Bentson Clark & Copple’s Resident Survey

We spend a lot of time and effort working with today’s orthodontic residents. We visit their residency programs, attend events solely catered towards the resident community and participate in resident-only webinars and presentation opportunities. We spend numerous hours speaking with them as they search for an orthodontic practice to purchase and/or employment opportunities. We are focused on actively working with and providing as much information as possible to them to help them make educated decisions about their future. This group of young professionals will ultimately shape the future of the orthodontic industry.

As part of our commitment to providing relevant, accurate and useful data to the orthodontic community, each year Bentson Clark & Copple conducts a nationwide survey of all current orthodontic residents for the purpose of collecting, compiling and analyzing information regarding today’s orthodontic resident population.

As in our previous surveys, we ask a variety of questions regarding residents’ anticipated plans after completing their residency program. The survey also inquires about income expectations, geographic locations, total educational debt, and preference of whether they would seek an employment relationship or equity opportunity upon graduation.

We have published a brief sampling of the 2012 Annual Orthodontic Resident Survey’s results in the 4th Quarter edition of the Bentson Clark reSource. We have, in addition, compiled the full results of this year’s survey in booklet form featuring our commentary and a comparison of this year’s data to that of the previous two years. This publication will be available for purchased within the next few weeks. Please check our website and blog for additional information and purchase information.

Who Should Perform Your Practice Appraisal?

At some point in the life of your orthodontic career, there will most likely come a time to have your practice valued. This process usually occurs only once for most practitioners, but more in some cases. The reasons for having an orthodontic practice valued vary, but by far the most likely reason is the contemplation of a change in ownership. If you plan to retire and sell your practice, a practice valuation is highly suggested as one of the first steps in the process. When the time arises, do you know who should perform your orthodontic practice appraisal?

The AAO provides its members with a list of companies or individuals that offer valuation/evaluation services to the orthodontic community. If the purpose of the valuation is for an ownership change, it is strongly suggested you select a firm that specializes in orthodontic valuation and transition services rather than using your local CPA or accounting firm. Bentson Clark & Copple, LLC, provides valuation services and appears on the AAO’s listing, as do several other well-respected companies.

Most Certified Public Accountants who have been involved in the sale of various businesses can likewise prepare some type of valuation report for your practice. For reliability purposes, the report should follow accepted valuation methodology. It should be completed and signed by someone who holds nationally recognized valuation credentials (such as CVA, AVA, ASA, etc.).

What is An Orthodontic Practice Valuation?

Bentson Clark & Copple specializes in orthodontic valuations and transitions, but what does this really mean and involve? We are in the business of helping orthodontists during the pivotal points within their careers. We perform practice valuations, provide partner location services, offer practice sales and marketing services and help negotiate practice transactions.

Let’s focus on practice valuation. You are more than likely aware of the concept of business valuation, but may question how orthodontic practice valuations work. When an orthodontist is ready to find out what their practice is worth, they come to us. We then provide them with an information request document. This multiple page form requests the doctor’s personal information, and general information about the practice, including, the staff, hours of operation, leasing arrangements, number of locations and referral sources, among other items. After this information is collected, we then accumulate statistical and operational information. We inquire about the practice’s fees, the number of start cases and case completions, contracts receivable balance, number of active and recall patients and information on all active patients with paid in full balances.

Besides the on-site practice visit, perhaps the most important part of the valuation is collecting the practices’ financial information. We ask doctors to provide the past three years’ profit and loss statements and the most current interim profit and loss statement. We also obtain the most recent tax year-end and month-end balance sheets and a fixed assets listing. Lastly, doctors need to submit tax returns for the past three years including any other supporting statements. (Generally, we find that practices that employ practice consultants have a good grasp on key operational metrics and systems compared to practices that do not use practice consultants.)

We take all this information and determine a fair market value of a practice through a valuation report. The report briefly explains the various general valuation approaches and the valuation approach used by Bentson Clark & Copple. Through a variety of charts, graphs and statements, we explain how the value is calculated. The report includes a practitioner biography, the practice history, state and local demographics and an industry profile.

For more information regarding orthodontic practice valuations, please contact our office.